Freight Insurance. Leading Insurance Features.

    In most respects the freight insurance policy is similar to other marine insurance contracts. Ordinarily the vessel owner's or charterer's interest commences when the vessel is ready to be loaded, and, where the vessel must proceed to a loading port, from the time the sailing in ballast commences. The policy may apply only to a voyage, or may be written on time, in which case the freight risk for an entire year may be covered as regards a single vessel or even for an entire fleet. Where the insurance pertains to a voyage, it continues until the contract of affreightment is completed or otherwise ended.

    In England and the United States, however, the common law does not recognize this principle of " distance " freight. Payment of freight, in the absence of special agreement to the contrary, is conditioned upon the full completion of the contract of carriage, and no compensation is due for a partial completion of the voyage. And this is true even though the failure to bring the goods to destination is due to circumstances beyond the control of the owner or charterer of the vessel or his representatives. Templeman states the principle as follows : " English law recognizes no payment of freight for the partial performance of the voyage, known as pro rata or distance freight. If owing to perils of the sea, the ship owner is prevented from delivering the cargo at the port of destination, he cannot require the merchant to pay anything for the portion of the voyage which the vessel has performed."

The amount covered is usually limited to a definite sum. For purposes of valuing the freight, it is customary to use the freight list or amount of charter. In open policies the sum is declared from time to time as already explained for open or floating cargo policies. In ascertaining the amount insured, consideration is given to the gross bill of lading freight plus the cost of insurance. In other words, the bill of lading freight and the insurance cost is the only interest at risk, and any loss to the vessel owner because the freight actually realized is less than the charter freight, owing to inability to secure sufficient cargo or, if the cargo is full, an adequate freight rate, is not covered. Such loss, it is clear, is in no way connected with the successful performance of the voyage and therefore does not constitute a risk which properly falls within the scope of marine insurance.

Two expressions, frequently found in freight insurance policies " on board or not on board " and " chartered or as if chartered" also deserve a few words of explanation. The first expression must be viewed in relation to the policy wording which reads: "beginning the adventure upon the said goods and merchandises from and immediately following the loading thereof on board the said vessel, etc." The words " on board or not on board," when applied to freight, are presumably intended to convey the thought that the freight insurance may attach before the goods to which the freight interest pertains have actually been loaded aboard the vessel. The same phraseology may also be advantageously used when freight is insured for a round voyage where the vessel will call at way ports for the purpose* of loading and discharging cargo.

The second expression " chartered or as if chartered," will serve the purpose of protecting vessel owners where the vessels are employed for the conveyance of their own property. Here these words would seem to indicate that, while the freight cannot be considered as charter freight, it is nevertheless protected as fully as though chartered freight were under consideration. Also in the case of future freight, the full expression " freight on board or not on board, chartered or as if chartered " would seem to cover a situation where the insurance is negotiated prior to the time that the future voyage, arranged for in a general way but not yet definitely chartered, is undertaken.